Lugar: Sala de Reuniones del Departamento de Economía. Edificio Los Madroños, 2ª planta (ECON-2026)

Ponente: Tibor Neugebauer (University of Luxembourg)

Título:  A greater fool game: speculating in zero-value assets

Abstract:  We experimentally investigate speculation in zero-value assets, that is, assets without any fundamental cash-flow value. The pricing of such assets in the market is predominately influenced by market sentiment rather than intrinsic utility. Our study aims to understand if individuals, under controlled laboratory conditions, opt to invest in zero-value assets and what factors drive such behavior. We introduce variations in narratives within subjects, presenting a potential high value aside from zero, while also implementing different treatments for ambiguity and risk across subjects. In the risk treatment, participants are informed of the extremely small probability of achieving the potential high value, while in the ambiguity treatment, this probability remains undisclosed.

Our results are as follows: First, across all 94 independent observations, we observe positive market prices for zero-value assets. This outcome is likely attributed to the exceptionally low entry price. Second, we find that market prices increase with the narrative of a potential high value. Third, while the revelation of the extremely small winning probability does influence market participation, its impact is not substantial. It is quite surprising that the maximum price is frequently reached even when participants are aware of the extremely small winning probability. Our data indicate that confusion plays a role in investment decisions regarding zero-value assets. However, the primary driver of speculation appears to be the greater fool theory, wherein investors believe that others will purchase the asset at a higher price.